Difference Between Limited Partnership and Family Limited Partnership
In this article, we will answer the question "what is the difference between a Family unit Limited Partnership and an LLC?" by defining "what is a family limited partnership?" and "what is an LLC?" LLCs and Family Limited Partnerships are similar, but they provide dissimilar benefits based on your concern goals.
What is a Family Limited Partnership?
A Family Limited Partnership, often called an FLP, is a business ownership arrangement made between family unit members who would like to own or run a business concern together. This is often washed when families want to assure the stability of their business' future and is also a strong way to make sure your family owned business organisation operates professionally and efficiently while still being family owned and minimizing the use of outsiders. In a FLP, there are two types of partners: general partners and limited partners. General partners are the near powerful and control 100% of the managerial and investment decisions of the company. Limited partners take fiscal investment and benefit from the success of the business, but they are not directly involved in managerial decision making. Typically, the "senior" family members such as grandparents or parents will be full general partners in their FLP and will exit their partnerships as inheritance to younger family unit members. This can continue through the generations to keep the business organization inside the family unit.
For more than detail on Family Express Partnerships, you can read our article or watch our video titled "Illinois Family Express Partnerships Explained".
What is an LLC?
An LLC (Limited Liability Company) is the simplest way of structuring your business. In an LLC, owners are referred to as "members" and tin be anyone. Sometimes, this is just 1 or two members, but the list can grow indefinitely and include partners, groups, or fifty-fifty other LLCs. LLCs are also unique with respect taxes in that they can be taxed as partnerships, meaning the visitor's income will be spread to each individual member's taxes rather than taxing the company as a whole.
For more discussion on LLCs, you can read our article "What is a Series LLC?"
What is the Difference Betwixt an FLP and an LLC?
There are several other key differences between FLPs and LLCs:
- Where FLPs designate power between general and limited partners with only general partners having managerial control, LLCs allow all members to participate in managerial decision making.
- LLCs protect every member from liability where FLPs only protect limited partners.
- FLPs offer unique tax benefits when shares are gifted as inheritance which allows senior members to pass downwards money in the form of membership. For more on this, cheque out our article: Family Express Partnerships Explained.
These are just some of the meaning differences between FLPs and LLCs. For more item on the specifics of the distinctions and how they employ to you and your business, yous should consult with a concern attorney.
Should I accept an FLP or an LLC?
Now that you know the basic definitions and differences between FLPs and LLCs, the natural side by side question is "which is better?" This is a question that is very much determined past your individual business and the goals you accept for it. If you are focused on a family unit-owned business and would similar to use the business every bit means of passing buying and money between generations, an FLP may be the right course for you. Notwithstanding, if you lot would like more liberty for who to cull as members and take control more evenly dissever among all members, or if liability is a concern, your best option could exist an LLC. Because of the wide multifariousness of options, LLCs are often preferred for new or growing business who are looking for the more than simplistic and malleable option for their business. Nosotros would highly recommend seeking advice from a business organisation chaser who will be able to counterbalance your options prior to making your determination. If yous would similar a consultation for your Illinois business organization, feel free to phone call usa at 630-324-666 or electronic mail at info@oflaherty-police.com.
For more helpful data on structuring your business, you can read our article "What is the Departure between an LLC and an Southward-Corp?"
Well-nigh the writer
Kevin O'Flaherty is a graduate of the University of Iowa and Chicago-Kent College of Police force. He has experience in litigation, estate planning, bankruptcy, real estate, and comprehensive business representation.
Source: https://www.oflaherty-law.com/learn-about-law/can-a-family-limited-partnership-be-an-llc-should-i-have-an-llc-or-flp
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